Legal Updates

Ski Area Water Rights: Federal Water “Grab” Resolved?

The United States Forest Service (“Forest Service”) manages 193 million acres of public lands that provide 20 percent of the nation’s clean water supply worth an estimated $7.2 billion per year. Management of public lands by the Forest Service includes issuance of special use permits for 122 ski area operations in thirteen states. 116 of the ski areas are located in 10 Western states, where water is often scarce. Although the U.S. Government owns the land, the ski areas must appropriate or acquire water rights under state law for snowmaking and other uses. The special use permits do not automatically give water rights to ski area lessees.

In 2011 the Forest Service issued a directive requiring joint ownership of existing water rights by ski areas and the United States. The directive sought to address the concern that ski areas might sell their water rights for a hefty profit rather than allow future operators of the ski area to continue use of the water right after an existing operator’s lease expires. Because the lessee historically held the water rights, this directive would have resulted in either: (1) a transfer of water rights into shared ownership with the Forest Service, or (2) a complete transfer of the water rights to the Forest Service. Critics of the 2011 directive quickly claimed that the proposal amounted to a federal water grab that would complicate operations, undermine the skiing industry, and devalue ski area leases. Opponents claimed that requiring federal ownership of water rights would limit ski areas’ ability to control their assets and operations.

The National Ski Areas Association sued the Forest Service to set aside the 2011 directive, arguing that the Forest Service should have allowed for notice and comment, a process providing for public involvement in federal decision-making. Nat’l Ski Areas Ass’n v. U.S. Forest Serv., 910 F. Supp. 2d 1269 (D. Colo. 2012). The court agreed and ruled that the Forest Service violated its own procedural rules, failed to evaluate the economic impact of the proposed directive, and violated the ski areas’ rights. The court vacated the 2011 directive for these failures to comply with procedural requirements.

The 2011 directive also sparked legislative reaction. Colorado Senator Cory Gardner proposed an amendment to the budget aiming to protect the supremacy of state water law over one clause of the Forest Service directive that sought to supersede state water law. The successful amendment established a deficit-neutral reserve fund relating to “protecting communities, businesses, recreationists, farmers, ranchers, and other groups that rely on privately held water rights and permits from Federal takings.” Similarly, Representative Scott Tipton proposed a specific water rights bill to “protect private water rights from uncompensated federal takings.” Although Representative Tipton’s bill did not pass, the joint Congressional efforts reflect the concern for privately-held water rights.

On June 23, 2014, the Forest Service posted notice of a new proposed directive with amended clauses addressing special use permits and associated water rights. The new proposed directive sought to provide assurances that sufficient water rights remain with the ski area permit for snowmaking and other essential operations (even if the ski resort is sold) but without requiring ski areas to transfer water rights to the Forest Service. The proposal allowed the ski area to continue to own the water rights as a special use permit holder, with the commitment that adequate water stay dedicated to operation of the ski area.

Forest Service Chief Tom Tidwell expressed his support for the proposed new directive: “Chair lifts can be replaced and lodges can be rebuilt, but once the water necessary for ski area operations is no longer available, the public loses opportunities for winter recreation. The economic effects of the loss of water may be far reaching. This issue has implications far beyond the boundaries of ski areas.”

After an extended public comment period, the Forest Service released its Final Directive on Forest Service permits for Ski Area Water Rights on December 30, 2015. The Final Directive requires an applicant for a ski area permit to submit documentation prepared by a qualified hydrologist or licensed engineer that demonstrates there is sufficient water to operate a ski area for the entirety of the ski area permit. “Sufficient water to operate a ski area” means that the applicant has adequate rights, or access to a sufficient quantity of water, to operate the permitted facilities, and to perform the associated activities authorized under the ski area permit under an operating plan. In determining whether a ski area applicant has sufficient water, the applicant’s hydrologist/engineer will consider typical conditions, taking into account variations due to weather and climate, technology, and infrastructure improvements.

The Final Directive further provides that if there is a change in ownership at any time, and a ski area “water facility” (defined as “a ditch, pipeline, reservoir, well, tank, spring, seepage, or any other facility or feature that withdraws, stores, or distributes water”) will no longer be used primarily for operating a ski area, the authorization for the facility under the ski area permit will be terminated and the water facility must be removed from Forest Service lands. If a ski area permit is terminated or revoked, the holder must give a right of first refusal for the water rights associated with the permit to the succeeding ski area permit holder. If the water use right is jointly owned with the United States, the holder must give a right of first refusal to the government.

Water use rights are valuable business assets for ski areas and considered necessary for operation in the arid West. Both the Forest Service and the ski industry consider the Final Directive, which took effect on January 29, 2016, to be a success. Time will tell if the dispute is truly resolved. In the meantime enjoy the powder!